For the contract above and for the year ended 30 June 2022, describe how Vitaltea Ltd would account for revenue arising from it in accordance with the requirements of IFRS 15 ‘Revenue from Contracts with Customers’
Contract 1
SkinPhD Ltd is a skin product company working with well-known skin product brands to distribute
their products. They are preparing their financial statements for the year ended 30 June 2022.
In January 2022, the company bought the rights to a new product range called ‘Beautify’ from
Vitaltea Ltd for a once-off fixed fee. No further costs associated with the acquisition of these rights
will be incurred. The company has entered the following contract:
Vitaltea Ltd granted SkinPhD Ltd a license to sell the products in their selected stores in Gauteng
from February 2022 onwards. In accordance with the contract, SkinPhD Ltd paid Vitaltea Ltd a
fixed fee of R1 000 000 for these rights. SkinPhD Ltd is an independent salon with outlets in
Gauteng.
REQUIRED:
For the contract above and for the year ended 30 June 2022, describe how Vitaltea Ltd would
account for revenue arising from it in accordance with the requirements of IFRS 15 ‘Revenue from
Contracts with Customers’
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